The great pointy-end points heist

Ah loyalty, that handy feel-good cash cow. For most airlines, the frequent flyer concept began in the 1980s as a simple marketing ploy to encourage travellers to “stick” with one carrier by encouraging them to amass a portfolio of points they could eventually redeem as a free seat.

Frequent flyer programs have been rebranded as “loyalty” or “reward” schemes, and the wildly successful phenomenon has become the key driver not only for consumers’ airline choice, but also for the credit cards they use, and even when and where they spend in order to leverage double-points promotion windows.

Qantas has increased the number of points needed to redeem a premium economy, business or first-class seat by up to 15 per cent. Supplied

Thanks to the tyranny of distance, we are among the world’s most active travellers, and the most competitive when it comes to points. I know people who know people who hold “Going for Platinum” dinner parties in Auckland to make their regular weekend status runs more of an occasion.

Under the changes, Qantas has released 1 million more “points” seats each year and reduced the number of points needed for an economy seat by 10 per cent. But that doesn’t change the great points heist up the front. The airline increased the number of points needed to redeem a premium economy, business or first-class seat by up to 15 per cent.

Sydney-based airline points specialist Steve Hui has been busy since the changes were announced. His popular business iflyflat.com.au is drowning in new data to help would-be pointy-end passengers better understand how to drink unlimited champagne on a beer budget.

In the old world order, a Sydney-London Qantas return business-class ticket cost 256,000 points. Now it’s 288,000, an extra 32,000 points.

If you purchase a Sydney-Melbourne discount economy fare, you earn about 800 points. That means you need to do 20 return flights on this route, or similar, just to chalk up the extra 32,000 points. If using credit card points, you will have to spend $2 for each Qantas point (or $1 per point on American Express). Thus you’ll need to spend between $32,000 and $64,000 to find those extra points.

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“Qantas is now the airline that requires the lowest points to fly economy but the most expensive points to fly business class,” Hui says. “At the end of the day, this constitutes a price rise at the front of the plane where they’re going to charge you extra points for the premium product, softened by the knowledge you’ll find more seats to suit your dates if they really do free up a million seats.”

His advice? “Two things I’ve long said: have a few points programs on the go if you can; and remember that it makes much more sense to redeem an entire business-class airfare on points, so don’t use points just to upgrade,” he says. “Never have those two things been more true.”

Points guru Steve Hui suggests having several loyalty programs on the go. Supplied

When you take Hui’s advice and start shopping around, you realise what a juggernaut this points game is. Loyalty might be the name, but healthy profits are the game. The margins are mainly built in when airlines sell the points to their credit card, retail and other loyalty program partners.

For the first half of 2019, the Qantas frequent flyer program made $175 million in operating profit – almost double Qantas International’s operating profit of $90 million. Qantas Group chief executive Alan Joyce has flagged he wants to hit $600 million in frequent flyer earnings before interest and tax by 2022.

Virgin Australia has 9.1 million Velocity members. Across the pond, Air New Zealand’s Airpoints loyalty program hit 3 million members in 2018 (for profit of $163 million), which is not bad for a country of 4.8 million people.

The Singapore Airlines Group’s 2018 annual report trumpets continued expansion of its KrisFlyer program, with a 13 per cent increase in itsmembership, more than 4 million, over the 12 months to June, 2018. Clearly, slugging those who aspire to travel in the pointy end doesn’t hurt: the year before, the airline had increased the number of points required for a business-class seat from Sydney to Singapore by 24 per cent.

Emirates Skywards has more than 20 million members, and says it gains 220,000 new members each month. Etihad Airways Group also has more than 20 million members in its Etihad Guest program. The largest single country source is Indian passport holders, at 5 million, followed by Italians on 3.5 million. Antarctica, Pitcairn Island and Liberia earn a special mention with just one member each.

No wonder comparative pricing sites are mushrooming, for points redemption and for credit cards to help earn those points. As Hui says, “it’s hard to earn 1 million points a year from just flying, but easy to earn them through paying bills and shopping”.

See, loyalty really does pay – especially for airlines and their partners. And it can for you too, if you have a few spare weekends to work it all out.

Postscript: Qantas says that since it announced the changes, it has seen a 40 per cent increase in international business-class reward-seat bookings and a 20 per cent increase in international economy reward seats.

Fiona Carruthers edits Sophisticated Traveller magazine, next issue out on Friday, August 2, in The Australian Financial Review.